Magna Entertainment gets court OK for $38.4 million of DIP financing

By Jennifer Lanning Drey

Portland, Ore., April 22 - Magna Entertainment Corp. received final court approval to obtain $38.4 million of debtor-in-possession financing from a subsidiary of the company's largest secured creditor and controlling shareholder, MI Developments Inc., according to a Wednesday filing with the U.S. Bankruptcy Court for the District of Delaware.

As previously reported, the amount was amended on April 20 by MI Developments from an originally requested amount of $62.5 million.

The proceeds from the DIP financing will be used to fund Magna's operations during the Chapter 11 proceedings, including the payment of employee wages and benefits and horsemen and customer winnings, as well as payment of post-bankruptcy obligations to vendors.

Interest will be Libor plus 1,200 basis points.

Magna will pay a 3% arrangement fee and a 1% commitment fee.

The terms of the DIP financing require the company to sell its assets through an auction process and use the proceeds from the asset sales to repay its creditors. The company has until May 4 to file a motion on the bid procedures related to the asset sales.

The DIP facility will mature on Nov. 6, 2009.

Magna, an Aurora, Ont.-based owner and operator of horse racetracks, filed for bankruptcy on March 5 in the U.S. Bankruptcy Court for the District of Delaware. Its Chapter 11 case number is 09-10720.

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